IDFC Becomes Receiving Office for Gold Scheme

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Government of India, in consultation with Reserve Bank of India (RBI), has issued Notification for the Second Tranche of Sovereign Gold Bond Scheme 2016 on January 14, 2016.

It has been decided to include IDFC Bank Limited as a Receiving Office.

The Annexure-I of the Notification dated January 14, 2016 stands amended to the effect. The other terms and conditions of the Notification shall remain unchanged.

The Reserve Bank of India will issue the second tranche of Sovereign Gold Bonds (SGBs) on January 18-22, offering an annual interest rate of 2.75 percent to domestic investors.

The first tranche of the scheme, which was launched in November, had got a subscription for 915.95 kg gold amounting to Rs 246 crore.

The Reserve Bank has fixed the public issue price at Rs 2,600 per gram for the sovereign gold bonds, for which applications will be accepted from Monday.

MAIN FEATURES OF SCHEME:

Sl. No. Item Details
1 Product name Sovereign Gold Bond 2016
2 Issuance To be issued by the Reserve Bank India on behalf of the Government of India.
3 Eligibility The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, Universities and charitable institutions.
4 Denomination The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
5 Tenor The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.
6 Minimum size Minimum permissible investment will be 2 units (i.e. 2 grams of gold).
7 Maximum limit The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.
8 Joint holder In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
9 Frequency The Bonds will be issued in tranches. Each tranche will be kept open for a period to be notified. The issuance date will also be specified in the notification.
10 Issue price Price of Bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).
11 Payment option Payment for the Bonds will be through cash payment upto a maximum of Rs. 20,000 or demand draft or cheque or electronic banking.
12 Issuance form Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form.
13 Redemption price The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
14 Sales channel Bonds will be sold through banks, SCHIL and designated Post Offices, as may be notified, either directly or through agents.
15 Interest rate The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
16 Collateral Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
17 KYC Documentation Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.
18 Tax treatment The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold.
19 Tradability Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.
20 SLR eligibility The Bonds will be eligible for Statutory Liquidity Ratio.
21 Commission Commission for distribution shall be paid at the rate of 1% of the subscription amount.

Government is unlikely to mobilise Rs 15,000 crore from sovereign gold bond scheme, even as its second tranche was launched.

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